Innocent by Association

Ever notice how there’s no counterpart to certain words?  For instance, have you ever met anyone who is “gruntled”?  The same might apply to phrases.   One phrase that I have heard often is “guilty by association”.  If that’s possible, shouldn’t it also be possible to be innocent by association?  I ask this mostly rhetorical question because of how the non-debate about market valuations has evolved of late.   I call it a “non-debate” because every time I bring it up, it seems the counterparty doesn’t want to get into facts or specifics, but rather prefers to hide behind a ‘security in numbers’ narrative stemming from the notion that most advisors and investors are acting as if valuations are not stretched.  This is, in my view, akin to retrofitting one’s (non) actions to support a preferred narrative.   It is also where I feel like a parent committed to imparting wisdom…  “If Jimmy jumped in the lake and Joanie jumped in the lake, would you jump in the lake just to go along?”


My fear is that many people (advisors and investors alike) are sticking together with a story that suits their purpose.  For investors, it’s one of enjoying rewards without really contemplating risks.  For advisors, that’s mostly one of gathering assets; not portfolio stewardship – and telling folks like me to stand down because we are outnumbered.  I am outnumbered.  I freely admit it.


Most people are not particularly fussed about valuations these days – even though stocks, bonds and real estate are all (simultaneously!) in the 98th or 99th percentile of valuations based on historical data.  That turn of events is frightening to me and the fact that it doesn’t seem to frighten others makes it even more frightening.


Rather than criticize my viewpoint, I ask that you kindly consider the company I keep.  So far, in the first quarter of 2021, the following luminaries have stepped out of the shadows to opine that we are either in a bubble or due for a major correction or setting ourselves up for a lost decade of returns or something along those lines.  The precise phraseology varies; the general sentiment does not.  The people who share my viewpoint to a greater or lesser extent as of early 2021 include: Jeremy Grantham, Peter Schiff, Harry S. Dent, Michael Gayed, Charlie Munger and Bill Gates.  These gentlemen all know a thing or two about growing and protecting long-term wealth.   Stated differently, I ask that you don’t take it from me.  I’m just one guy and it is all too easy to ignore me.  Take it from the people I respect.  Markets are dangerously expensive right now and even if you’re not worried, I stand by my position that I think you should be.  Most notably, I am far from alone in my concern.

John DeGoey

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